Top Ten News Stories of 2013
For the second consecutive year, our top story is low water and its effect on the inland waterways. Once again barge operators were faced with draft limitations and other waterway restrictions. Other top stories include the grounding of the rig Kulluk in the Gulf of Alaska that put a wrench into Shell’s Arctic drilling plans and the decline in coal cargo. As a kickoff to 2014, we take a look at the Top 10 News Stories of 2013.

12/1/2013

Mother Nature continued to plague barge operators along the inland waterway system for a third year in a row. In 2011, it was massive flooding that caused navigation problems. Last year it was the opposite – low water. And low water troubles have persisted during 2013.

Overall, 2013 was better than last year because the Army Corps of Engineers had dredged out some of the shoaling problems from a year ago. 

“Relative to a year ago, it’s better. Remember that in 2011 we had the massive flooding which deposited all kinds of things on the bottom,” said Sandor J. Toth, publisher, River Transport News. “Then when the water fell out in 2012, it created all kinds of issues. So the topography is much different this year than a year ago. The [Army Corps of Engineers] went in last year and did some dredging, so the problems this year aren’t as severe from that standpoint.”

Toth said low water challenges were abated somewhat in the spring and summer, but water levels began to drop in earnest in September. “It’s not good for barge companies when they normally load to 12 feet but have to load only nine or nine and a half,” he said, and barge companies were still light loading in November.

The St. Louis area was among the hardest hit by the drought. In late 2012 and early 2013, the Corps and the U.S. Coast Guard undertook a rock removal project on the Mississippi River near Thebes, Ill., in order to maintain a nine-foot-deep channel. 

About 890 cu. yds. of limestone was removed from the water-starved river to reduce the navigation risk in the channel during low water. The rocks are part of a large formation that impedes the navigation channel during low water. Additional rock removal projects were conducted throughout the year.

Mike Petersen, spokesman for the Corps’ St Louis District, said it’s been a roller-coaster ride in 2013. 

“It’s low right now, but it’s stable,” he said in late October. “In March, the water level jumped 10 feet in a day. That put us in flood stage pretty quick.” The river rose 24 feet near St. Louis between March 7 and March 14.

Kirby Corp. said that during July adverse operating conditions continued due to the Algiers Lock closure that created heavy congestion and delays in the New Orleans area and resulting congestion and delays at the Bayou Sorrels and Port Allen locks. The Algiers Lock reopened in mid-July. During September, low water levels on the upper Mississippi River System led to the light loading of tank barges destined for that area, Kirby said. 

In September, low water pushed grain rates higher. Spot rates were trading just under 600 percent of benchmark tariff compared to 440 percent just two weeks prior, Toth said. “If you’re on the dry side, this year has been pure unadulterated hell.”

Petersen said he expects water levels to continue to drop in the near term. “Beyond that, it’s hard to say, especially upstream of us.” — Ken Hocke 


 


 

The year didn’t start well for the Kulluk, Shell’s conical drilling unit that ran aground in the Gulf of Alaska on New Year’s Eve. 

While under tow by the Aiviq, a new 22,000-hp,Arctic-class 360'×80' OSV owned and operated by Louisiana’s Edison Chouest Offshore, the Kulluk’s Christmas-time trip from Dutch Harbor to Seattle ended badly after tow gear kept breaking during a storm. (The Aiviq was built in 2012 specifically for Shell’s Arctic drilling program.) The Aiviq had severe engine problems and even Crowley’s 10,000-hp tug Alert couldn’t provide sufficient assistance. After being deliberately released, the rig grounded on Sitkalidak Island south of Kodiak. A week later, the heavily damaged rig was yanked off the beach, inspected for damages and towed back to Dutch Harbor where it was loaded onto a heavy-lift ship for transport to Singapore for repairs. 

At the same time, Shell’s plans for continued Arctic operations in 2013 were compounded when problems with the Noble Discoverer, its companion drilling ship, also required a trip to an Asian shipyard. 

With these setbacks, Shell announced in late February that it wouldn’t attempt further Arctic drilling during the summer of 2013.

Then in March, the Department of the Interior issued a stern report on Shell’s Arctic drilling operations with some strong recommendations for future preparedness and compliance. 

In May, the U.S. Coast Guard held a hearing in Anchorage, Alaska, as part of its investigation of the accident. The report will be released next year.

Now it appears that the Kulluk may be out of the picture entirely. During a conference call on Oct. 31, Simon Henry, Shell’s chief financial officer, told reporters that the drilling rig’s repair costs were too high and it won’t be returning to Alaska. He said Shell would probably be incurring “impairment costs” of about $200 million for the Kulluk.

Henry added that if Shell drills in 2014, it would do so only in the Chukchi Sea, where the Noble Discoverer drilled a top hole in 2012. The company will temporarily abandon plans to drill in the Beaufort Sea, where the Kulluk also drilled a top hole in 2012. “The problem with the Beaufort Sea is it’s too shallow to get normal rigs in,” said Henry. “So our focus is very much on the Chukchi, which is by far the biggest prize. That’s the multibillion-barrel prize.” 

Since any Arctic drilling requires a back-up drilling rig, Shell will lease the Polar Pioneer, a semisubmersible owned by Transocean

Meanwhile, the Coast Guard continues to investigate the grounding as well as problems with the Noble Discoverer during Shell’s 2012 Arctic exploratory program. Its report is expected next year. 

Other obstacles to resuming exploratory drilling include revised rules for Arctic exploration from the Department of the Interior and lingering litigation over terms of the 2008 lease sale, which is being reviewed by the Ninth Circuit Court of Appeals.  — Bruce Buls 

 


 


 

Little relief is in sight for the headaches caused by theTransportation Worker Identification Credential program as the government presses ahead with a rule for electronic card readers.

A final rule on the card readers is expected to be out by late 2014, a Coast Guard spokesman said. This is after the agency sifts through nearly 200 comments on the docket and sentiment from four public hearings on the proposal published this past March. Once the final rule is released, vessels and facilities would have two years to comply. 

 One operator after another said they had good systems in place onboard and on shore. They maintain, as Arthur Volkle, vice president, Marine Resources Group (now Foss Marine Holdings), Seattle, wrote,“that card readers on board our vessels do not create any significant enhancement of security.”

U.S.-flag vessels with limited crew “do not present sufficient risk to warrant the requirement of a TWIC reader. It should be pointed out that the TWIC requirement does not apply to foreign-flag vessels,” said Volkle, whose company owns eight tug and barge companies including Foss Maritime, AMNAV Maritime Services and Hawaiian Tug & Barge.

 He also suggested that the new rule, in the works for six years, should apply to vessels with a crew of 30 or more instead of the proposed limit of 14. Boats carrying fewer than 1,000 passengers also are exempt.

Other suggested changes include an exemption for barge fleeting facilities, especially in remote areas and an evaluation of the whole TWIC program.

Many also questioned the value of the TWIC itself.

“No employee has ever been required to produce the credential other than during a scheduled Coast Guard COI inspection of one of our vessels,” wrote Ray Lyman, vice president of vessel operations, Catalina Express, San Pedro, Calif., which provides ferry service to Catalina Island. “A TWIC reader requirement would just extensively add to the burdensome expense of this TWIC program.”

 The maritime industry is one of most regulated in the country, Lyman said, and he hopes that rule writers will consider the impact “of all these regulations upon an industry dealing with high fuel costs, increasing insurance premiums, emissions control costs and the fact that we carry the most litigious cargo in the world.”

The total price tag for TWIC, part of the Maritime Transportation Security Act of 2002, is $3.2 billion over 10 years.

The government wants to require the readers to control access to high-risk vessels and facilities. 

Earlier this year, the Government Accountability Office (GAO) said results of a pilot test of biometric readers were “incomplete, inaccurate and unreliable” and should not be used in developing a reader regulation. Coast Guard Rear Adm. Joseph Servidio told a congressional hearing that the agency was aware of the pilot program’s limitations and “used it with discretion” in developing the proposed rule.

Since the TWIC program began in 2007, the Transportation Security Administration (TSA) has issued credentials to more than 2.5 million workers. TSA this year belatedly started a program to ease the pain on that front. 

The “OneVisit” initiative permits people to apply for and obtain a TWIC card in a single stop. It began with a pilot program in Alaska in July.

By the end of the year, TSA expects to announce additional pilot programs in the continental U.S. and to implement a nationwide program by the third quarter of 2014. — Dale K. DuPont 


 


 

Activity in the U.S. Gulf of Mexico (GOM) continues at a healthy pace. As of Oct. 25, the number of rigs operating in the Gulf stood at 60 (18 gas, 42 for oil), up from 42 in the first month of 2012, according to the Baker Hughes Rig Count. 

Deepwater rig deployment is responsible for a big part of the increase in rig numbers. Forecasts now call for a total of 60 deepwater rigs to be active in the U.S. Gulf by the end of 2015.

Permits to drill in the GOM also continued to increase, recovering from the permit moratorium following the Macondo disaster. Through the end of September, the U.S. Bureau of Safety and Environmental Enforcement (BSEE) had issued 818 GOM drilling permits in 2013 (for new wells, revised new wells, bypass and revised bypass wells, and sidetrack and revised sidetrack wells).

Significant additions to the Gulf deepwater rig fleet are expected next year, when 12 floaters are expected to begin work. Two (Ocean Confidence and Discoverer America) will return to the GOM from Africa. The remaining 10 rigs scheduled to begin work in the U.S. Gulf next year are currently under construction.

At least two additional deepwater rigs should join the GOM fleet in 2015.

While drilling has been picking up in the GOM, production has been somewhat stagnant. This is due both to the mature, lower-production condition of many shallow-water GOM fields and steep production decline rates in some deepwater fields. The increase in active rigs, especially deepwater rigs in the GOM, is due in part to efforts to sustain production in the wake of those steep decline rates.

But the increase in rigs represents much more than an attempt to stave off production declines in the GOM. Thanks to the Lower Tertiary formation in the deepwater GOM, production from the region is now projected to increase by some 700,000 bpd over the next three years, an increase of more than 30 percent. The increase in rigs will be instrumental in developing the full potential of the Lower Tertiary.

The increase in production will lead to a spate of new, deepwater production facilities such as Chevron’s Jack/St. Malo (in 7,200' of water, with an initial capacity of 170,000 bpd) and Big Foot floating production platforms.

The deepwater drilling rigs and production facilities are very pricey by any standards. But, as Steve Thurston, vice president of Chevron’s North American Exploration and Production Division recently told Reuters, “This is still one of the premier oil and gas regions in the world and that’s why we’ve never left.” — Bill Pike 


 


 


 

Harvey Gulf International Marine’s big appetite for acquisitions and newbuilds continued in 2013, and some speculate that the company is heading towards the holy grail — an IPO.

“It’s certainly something there’s been more dialogue about,” Jeff Henderson, executive vice president and chief financial officer of the New Orleans-based company said at the International WorkBoat Show in October. “Doing an IPO certainly isn’t out of the question.”

Henderson, who delivered the keynote address at the show, has been a big part of Harvey Gulf’s deals. The latest was the $460 million purchase of most of Abdon Callais Offshore’s assets, which included 48 vessels. It was finalized on Oct. 11. Harvey Gulf then sold six older ACO vessels to Adriatic Marine for $72 million.

The ACO purchase was Harvey Gulf’s third major deal in the past year. The others include 11 DP-2 offshore supply and fast supply vessels from Gulf Offshore Logistics for an undisclosed price and nine Bee Mar OSVs for $243 million. The addition of GOL’s five crew-suppliers enabled Harvey Gulf to break into the crewboat market.

With the ACO purchase, Harvey Gulf’s total capital expenditures since August 2008 are now over $2.1 billion.

Harvey Gulf is also busy building vessels, including LNG-powered OSVs and heavy lift construction vessels. The company has six 302'×64', dual-fuel (LNG and diesel) OSVs underway at Gulf Coast Shipyard Group (formerly TY Offshore). 

The vessels will be the first OSVs in the Gulf to have tankage for both fuels.

Henderson said that as of Oct. 9, they have signed contracts with Shell for three LNG vessels and are getting calls from Australia and the Mideast about the others. Harvey Gulf also plans to construct and operate the first LNG marine fueling facility in the U.S. in Port Fourchon, La. It will consist of two sites that will each have 270,000 gals. of LNG storage capacity. The first site is scheduled for completion in February 2014. Harvey Gulf has committed $400 million to the LNG OSVs and two LNG fueling docks. 

The company is also having two 327'×73'×29'3" heavy lift construction vessels built at Eastern Shipbuilding Group in Panama City, Fla. The vessels will feature 250-MT active heave compensated cranes for deepwater lowering. The two HLCVs, due for delivery in 2016, are in addition to the 302'×64' Z-drive, light construction vessel Harvey Deep-Sea that was built at Eastern and delivered in July. 

As of Oct. 15, Harvey Gulf had 14 vessels ranging in size from 220' to 340' under construction at five shipyards.

“It’s been a very busy year,” Harvey Gulf CEO Shane Guidry said modestly. 

— David Krapf 


 


 

Bollinger Shipyards Inc. beat back government claims of fraud in the stretching of eight U.S. Coast Guard cutters that were ultimately deemed unseaworthy.

 In October, a federal judge dismissed a two-year-old lawsuit against the Lockport, La., yard, saying the U.S. presented no facts “that allow the inference that Bollinger acted knowingly or with reckless disregard or deliberate ignorance of the truth” in the $80 million cutter extension project.

The government alleged Bollinger submitted false data about the hull strength of the 110'×21' Island-class patrol boats (WPBs) that were lengthened to 123'. The U.S. said Bollinger wanted results “high enough to avoid further Coast Guard scrutiny and ABS [American Bureau of Shipping] review of the vessel’s structural integrity.” The vessels, which were originally built by Bollinger in the late 1980s, have been taken out of service.

The Coast Guard took delivery of the Matagorda and other lengthened cutters in 2004 and “continued issuing payments for Bollinger's work for more than two years after the structural failure of the Matagorda,” U.S. District Judge Sarah Vance said in her order. “These circumstances suggest that the government knew that the reported section modulus might be incorrect and was willing to pay anyway. There can be no FCA [False Claims Act] liability in such circumstances.” 

Congress passed the False Claims Act in 1863 over concerns that suppliers were defrauding the Union Army during the Civil War. It “is a powerful enforcement tool, allowing the government to get treble damages,” said Michael Vernick, a lawyer with Hogan Lovells, Washington, D.C., who specializes in government contracts. “The government has recovered more and more money in recent years.” 

The law is used frequently and can be initiated by the government or a private individual.

In the Bollinger case, the judge’s order was her second dismissal of the year. She tossed out the case in January, saying the government needed to be more specific about where the fraud occurred and gave it 20 days to amend its claims, which it did in a longer, more detailed suit.   

The government cited several potentially damaging internal e-mails about the calculations and ABS review, but the judge interpreted them as benign. On one point, for example, she calls a government theory obscure. An e-mail from shipyard CEO Boysie Bollinger suggests a belief that the ABS review was not contractually required and “not a belief that he could somehow escape an existing requirement by turning it down,” she said. “In sum, [his] emails do not suggest an intent either to avoid ABS review at all costs or to falsify section modulus calculations. The inferential leap the United States urges — that Boysie Bollinger implicitly instructed his subordinates to take steps to avoid ABS review, and that they responded by falsifying calculations — is simply not reasonable.”

  After the ruling, yard president Chris Bollinger said in a written statement, “All of us in the Bollinger Shipyards family are gratified by the court’s thorough and well-reasoned decision dismissing with prejudice the Department of Justice's allegations against Bollinger relating to our work on the Deepwater project.”

The Justice Department declined to comment.

In the end, eight cutters were taken out of service, the government failed to prove fraud, and the yard has continued building Coast Guard vessels.

— D.K. DuPont 


 


 


 

Old King Coal was hardly a merry old soul this year.

Competitive natural gas prices, environmental restrictions and a declining export market had utilities shutting and shedding coal-fired plants. Barge operators, who haul 20 percent of domestic coal, are feeling the pinch.

Current and planned closings “will have a direct impact on the amount of coal our members are carrying on the water and will lessen the amount of coal that is moving through the system,” said a spokesman for the American Waterways Operators, the industry’s main trade group. “As a result, some of our member companies are looking to carry more export coal and are exploring potential opportunities in movements related to shale natural gas and domestic oil.”

The Energy Information Administration (EIA) expects total coal production of 1.01 billion short tons in 2013, slightly lower than last year. Next year’s estimate is 1.04 billion short tons, but that’s still lower than 2011’s 1.09 billion for the major power generation source in the U.S.

  The barge industry carries 20 percent of the nation’s coal, enough to produce 10 percent of all U.S. electricity consumed annually. So the health of the coal business matters.  

AEP River Operations LLC, for example, which has a fleet of about 3,000 barges and 70 towboats, lost money the first nine months of the year due to adverse water conditions and “significant reductions in grain and export coal demand,” regulatory filings show.

AEP’s Columbus, Ohio, parent company, American Electric Power, expects to have closed 28 power units from Virginia to Oklahoma from February 2012 through 2016. That represents about 28 percent of its coal-fired generation and about 17 percent of its total power output, a spokesman said.

More recent announcements include the planned closing of New England’s largest coal-fired plant by 2017 and three coal-fired plants in Michigan by 2016.

 Operators often blame the closings on current coal market conditions and the cost of complying with environmental regulations. 

The Environmental Protection Agency (EPA) recently proposed tougher carbon emission standards for new coal and natural gas plants. 

“The proposed rules will have a significant impact on our members’ customer base, and we are beginning to see that play out,” AWO said. “At the same time, we believe that coal will continue to be part of the nation’s energy solution, and coal will continue to move via barge” because it’s efficient, reliable transportation.  — D.K. DuPont 

 


 


 

LNG made great strides in 2013. A number of newbuild projects will use LNG in dual-fuel configurations that will change the way many workboats are powered.

“There are two very good reasons for using LNG — a lower cost of fuel and lower emissions,” said Bob Hill, president, Ocean Tug & Barge Engineering, which has several dual-fuel project designs underway, including an articulated tug-barge container carrier for Houston-based Minyan Marine. “It’s happening now. It’s underway.” 

Harvey Gulf International Marine is building six 302'×64' dual-fuel (LNG-diesel) propulsion OSVs at Gulf Coast Shipyard Group (formerly TY Offshore) in Gulfport, Miss. For the most part, the new OSVs will run out to offshore structures on diesel fuel, then switch over to LNG while on station.

“We think LNG is going to be the fuel of the future,” said Jim Rivers, vice president, international sales at Gulf Coast Shipyard. “Harvey Gulf is bringing that technology to the Gulf of Mexico.”

Harvey Gulf is also building a new LNG bunkering facility in Port Fourchon, La. It will consist of two sites that will each have 270,000 gals. of LNG storage capacity. The first site is set for completion in February 2014.

And there are other LNG players. Waller Marine has an LNG bunkering project under construction at the Port of Baton Rouge, La., and Edison Chouest Offshore has announced it is also building an LNG fuel supply operation in the Gulf.

The question is how quickly LNG infrastructure can be built to meet demand. Some experts foresee problems finding communities that want LNG fueling plants in their towns and cities. 

“None of this development comes free,” said Hill. “The regulatory environment is still in its early stages.”

Hill also questioned what would happen to natural gas prices when the U.S. begins exporting LNG to other countries. Cheniere Energy’s Sabine Pass liquefaction project in Louisiana was the first application approved to export to both free trade and non-free trade countries. It was approved in 2011. DOE is reviewing a number of other long-term applications to export to non-free trade countries. 

“If natural gas prices go up, you can’t blame people for looking at diesel if it’s cheaper,” he said, “but the one thing that LNG will have that diesel doesn’t is that it burns cleaner. It’s got that environmental component.” 

For now, LNG is growing in popularity and possibilities. The U.S. and the Obama administration are embracing the concept of LNG as a marine fuel. 

The Department of Transportation is sponsoring a demonstration project using a container ship that will be repowered to use LNG. The Maritime Administration is also funding research for LNG fuel transfer, infrastructure and training. — K. Hocke 


 


 


 

For senior salvage master Nick Sloane, righting the Costa Concordia was “far more challenging than any other wreck removal in my career.”

The size and location of the cruise ship, “the vast numbers of the team [that] had to commit to a protracted salvage operation, along with a roller-coaster ride through the winter season whilst drilling challenges into the inshore and offshore granite,” all added up to a 16-month project that “was evolving as it was progressing,” said Sloane, who has a 30-plus year perspective on the business.

The spectacular, unprecedented feat culminated at 4 a.m. on Sept. 17 with the world watching. The 950'×118'×26', 115,000-ton cruise ship was slowly rotated 65 degrees to an upright position. The actual righting of the cruise ship, called parbuckling, began at 9 a.m. on Sept. 16. 

The ship had been lying on its starboard side off the Italian island of Giglio since Jan. 13, 2012, when it hit a rock and sank, killing 32 of the 4,200 people onboard.

Sloane was leading the effort for TITAN Salvage, a Crowley Maritime Corp. subsidiary based in Houston, and for Italy’s Micoperi.

The ship, owned by Costa Crociere, a unit of Miami-based Carnival Corp., was to be refloated in one piece with minimal environmental impact. Salvage experts likened the job to trying to pick up a soggy loaf of bread. 

The sheer mass of the 17-story ship was daunting. The salvors had to first stabilize the ship, then build a subsea platform and fix water-filled caissons to the port side and pull the ship up with cranes fixed to the platform.

“We managed to achieve breakout/liftoff of the Concordia at around 6,800/6,900 tons on the offshore sponsons, with around a third of this on the holdback system inshore,” Sloane said via e-mail. “We had around 100 percent spare capacity, but we were at the higher limits of the ‘load-window’ based on weight assumptions.

“The engineering software models and monitoring components used through the parbuckling made this the most engineered and technological wreck removal ever attempted.” 

Shortly after the wreck was upright, workers began stabilizing it to face the worst possible winter weather scenarios, according to information on www.theparbucklingproject.com, the project website. Measures include positioning an additional hold-back system to avoid bow movements and installation of removable grout bags between the wreck and the rocks on the land side.

The salvage has cost $828 million and involved 30 vessels and a multinational team of 500 workers. Costa also awarded a $30 million contract to Dockwise to possibly haul the wreck for scrapping. — D.K. DuPont 


 


 

The U.S. Merchant Marine Academy embarked on long overdue efforts in 2013 to update its crumbling facilities, revamp its curriculum, improve internal operations and boost faculty and student morale. 

The Kings Point, N.Y., school had gone through several tumultuous years punctuated by revolving leadership, an absent training ship, facilities so old that they posed health hazards to midshipmen, and doubts expressed in Washington and within the maritime industry about the academy’s relevancy in producing the next generation of merchant marine officers.

Things got so bad in 2010 that a Blue Ribbon Panel tasked by DOT to assess the school called the situation “dire” and concluded that the academy had reached a “tipping point.” The panel warned that unless improvements were made, USMMA could lose its reputation as a world-class maritime training institution as well as its accreditation.

This past year has seen a flurry of renovations, as the Maritime Administration has invested heavily in renovated barracks, dining halls, sports facilities and a new pier. It’s part of a five-year strategic plan launched in 2012 that also includes reforms in USMMA’s organizational structure, admissions and relations with Marad, faculty, alumni and the marine industry.

“It’s all very positive,” said Rear Adm. James A. Helis, who became superintendent in June 2012. “We’re continuing to invest in infrastructure, and we will have money in 2014 to cover more improvements in the coming year. This demonstrates continued support from Congress and the administration to improve infrastructure at the academy. We’ve made significant progress in the past year and this will be sustained going forward.”

Also in the offing are updates to the curriculum so that the academy can keep abreast of changes in the maritime industry, officials say. As U.S. bluewater shipping has declined, there’s been a surge in the brownwater industry. Thus, Kings Point, like the state maritime schools, is adding courses on the offshore and inland waterways sectors.

“There’s a great deal of interest in brownwater and offshore jobs,” said Dr. Shashi Kumar, academic dean. “Fifty-nine of the 202 graduates in the class of 2012 said they were looking at brownwater jobs, the highest we’ve seen, and more representatives from brownwater companies are coming to recruit on campus.”

Helis dismissed criticism that the school’s mission has become irrelevant in the face of changes in the maritime industry. “Our graduates are still in high demand,” Helis said. “They go into 100 percent employment, so there is still a need for licensed mariners.”

Pamela Glass 


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